Episode 2: What is important about taxes in Romania?


We will continue in this second episode summarizing the most important aspects regarding the taxes that a company pays in Romania.


Tax on corporate income

The standard corporate tax rate is 16% for the companies established in Romania and for the foreign companies which are operating through a permanent establishment in our country.

Regarding the companies carrying on activities such as nightclubs or gambling are either subject to a 5% rate calculated from their revenues obtained from such activities or to 16% from the taxable profit - whichever is higher.


Special rules for the micro-companies

Any newly company established in Romania, must follow the micro-companies’ regime until such company revenue at the end of the previous year stands at EUR 1 million.

The tax rates on corporate income calculated for micro-companies are:

  • 1% for the companies with one or more full-time employees;
  • 3% for the companies without employees.

If the micro-company have a subscribed share capital in value of at least EUR 9,500 and minimum 2 employees can opt once (without the option to return to the initial tax regime) for applying the standard corporate tax rate in value of 16%.


Dividend tax

The dividend tax applicable to gross dividend paid or distributed is 5%.

The shareholder is entitled to receive dividends payment after the tax is calculated and withheld in order to be paid to the tax authority.

Usually, the dividends are paid yearly, after the financial statements for the previous year are prepared but can be paid also on a quarterly basis, during the financial year.

A health insurance contribution in value of 10% shall be paid by each shareholder which receives dividends in value of more than 12 minimum gross salaries. As per 2021, if a shareholder receives dividends worthen over EUR 5,600, the 10% contribution must be paid to the tax authority calculated at the EUR 5,600 amount. If the dividends value is higher than EUR 5,600, the tax shall remain in value of EUR 560.


Value-added tax (VAT)

The standard VAT rate in Romania, applied to all providers of goods and services (including imports) that neither qualify for an exemption nor for a reduced VAT rate is 19%.

For varied product deliveries related to agriculture and local utility services the VAT rate is set at 9%.

For school supplies, entertainment events, accommodations, restaurants and catering, transportation, etc the VAT rate is set at 5%.


Building tax

Depending on their destination usage, the Local Council can set the following tax rates:

  • Between 0.08% - 0.2% from the building tax value for the residential buildings;
  • Between 0.2% - 1.3% from the building tax value for non-residential buildings.

Any company which does not perform a reevaluation during the last 3 years shall pay an increased tax rate in value of 5%.

If a building is acquired in the course of the year the building tax for the entire year must be paid by the seller. The buyer shall be liable for this tax starting with the next fiscal year.

The tax is paid annually, in two equal installments but if the tax is paid upfront until 31th of March, a 10% discount is granted by the Local Council.


Land tax

This tax is established by the Local Council in a fixed amount per square meter, depending on where the land is located and its use.


Payroll taxes and social/ health security contributions

Starting with 1st of January 2021, the value of the minimum wage in Romania is EUR 470. For the employees having higher education degrees the amount is in value of EUR 480.

Monthly, from the gross income of the employee, the employer withholds the below detailed contributions which are wired to the Romanian tax authorities.

Separately, the employer pays to the Romanian tax authorities a work insurance contribution is value of 2.25%. This contribution is in value of 4% for uncommon work and 8% for special work conditions.

 CONTRIBUTION

EMPLOYEE

 EMPLOYER

Income tax

10%

Not applicable

Health insurance

10%

Not applicable

Pension insurance

25%

Not applicable

Work insurance

Not applicable

2.25%

 Total

 45%

2.25%


The income tax in value of 10% shall not be paid by the employees working as IT specialists or in the Research & Development field, under certain conditions.

For the period spanning 1st of January 2019 to 31st of December 2028, under certain conditions, certain tax incentives are in force.


Depending on your company's activity other taxes may be paid. In this regard a professional accountant advice should be taken in consideration.